Launch pad

You'll want to get in at the beginning on new Dodge & Cox fund

BOSTON (MarketWatch) -- Look at any mutual fund with a long-term track record so good that it has almost become a household name and you'll come to one undeniable conclusion: It sure would have been great to have owned the fund from the very beginning.

But the fund industry's flagships and name brands -- Fidelity's Magellan and Contrafund, Vanguard's Windsor and Wellington, American Funds' Growth Fund of America or the Janus fund -- weren't on anyone's radar screen back when they were newborn and were already legends by the time most investors recognized their greatness.

While money managers crank out dozens of new funds every month, most are cookie-cutter forgettable, with no outward signs of potential greatness.

So when word got out last week that San Francisco-based money managers Dodge & Cox are opening a new global stock fund, it created a buzz because people in the know think they may be seeing the next great fund, the kind of issue that can make a name and satisfy investors for decades to come.

And investors can own it from the very beginning.

Dodge & Cox may well be the best fund firm in history. It's a humble, publicity-shy firm with a 78-year history of superior management. Unlike the industry giants who pop out a new fund every time the market burps, Dodge & Cox built its reputation with just four funds; all four of those funds are in the top 30% of their peer group over the last five years and the three funds with records of more than a decade (Dodge & Cox International was the last new issue, created in 2001) are all in the top 10% of their Morningstar peer group over the last decade.

In short, each of the firm's four funds is a standard-bearer in its asset class, and Global Stock could be next.

"Lots of fund companies make funds to sell, coming up with what they think the market wants," says Dan Culloton, who follows Dodge & Cox for Morningstar Inc. "Dodge & Cox sells what they make. They do things one way -- their way -- and they let you come along for the ride. ... A new fund from Dodge & Cox immediately commands the attention of serious investors because of the firm's reputation and culture."

Dodge & Cox Global Stock fund will follow the firm's value- and team-oriented strategy to pick stocks from around the world. It will invest in mid- to large-size companies from at least three different countries and will keep at least 40% of its assets in non-U.S. stocks.

"This is not going to be some fly-by-night strategy where management wants to see if it throws up something that sticks to the wall," says Jeff Tjornehoj, senior research analyst for Lipper Inc., "It's pretty tough to say that any fund -- especially one that has no track record and that isn't even open yet -- will beat the leading funds over the next five or 10 years, but you can say that Dodge & Cox doesn't hit far outside the bulls-eye very often."

Rough ride early on

That said, the new fund won't have an easy time getting out of the box.

New funds typically get a pop from being small and nimble without much attention from anyone. That's not going to happen here as financial advisers had been asking Dodge & Cox to go global for years, so there will be a flood of money at the outset. Moreover, overlap in the management teams means the new issue will likely focus on the same stocks as the established funds, rather than looking in new or unique directions.

"You miss out on the ground-floor effect," says Stephen M. Savage, editor of the No-Load Fund Analyst newsletter, "but you're still buying the kind of fund you could probably be comfortable holding for a lifetime."

As such, investors should consider whether the new fund -- or the reopened Stock or Balanced funds -- might be worth buying. That decision starts with a portfolio review, determining if you have a need for a global fund (or one of the reopened funds).

Then, it requires having the confidence to invest with a firm like Dodge & Cox and be patient; the firm's value style may be out of step with the market for awhile, so the new fund could be opening into a trough.

Finally, determine if the fund can replace something you own now.

"New funds like this create a wonderful opportunity to prune your portfolio," says Jerry Tweddell of Tweddell Goldberg Investment Management in Sonora, Calif. "Maybe you have some laggards that haven't been bad enough to sell. Now you have a reason; sell because you can do better in the new fund, and a lot of people will think they can do better with something from Dodge & Cox."

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